Chasing Gold: The Incredible Story of How the Nazis Stole Europe's Bullion (4 page)

The Soviet Politburo on August 21 asked state planners to draw up a large-scale program of military assistance to the Republican government. The program was dubbed Operation X. The plan recommended shipping fighter aircraft, bombers, light tanks, heavy tanks, armored cars, and torpedo boats. In addition to the hardware, the communist leadership proposed sending military advisors and combatants such as pilots, mechanics, radio operators, and code-breakers.
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The Soviet government at the time did not have diplomatic relations with the Republican government, but it quickly appointed Marcel Rosenberg, formerly the Soviet representative at the League of Nations in Geneva, to be ambassador. He arrived in Madrid on August 27. A phalanx of Soviet attachés and advisors quickly joined Rosenberg in the capital. Vladimir Antonov-Ovseyenko, the commander of the Red Guard unit that captured the Winter Palace during the Russian Revolution, went to Barcelona as consul general. A few days later on September 2, Soviet agents in Western Europe received instructions to set up a clandestine network to “purchase and transport arms to Spain.” Stalin, though, instructed anyone going to Spain to “stay out of range of the artillery fire.”
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Among the new Soviet officials was Alexander Orlov, a top operative in the secret police, who had the title of political attaché. Orlov, a man of many names, was born on August 21, 1895, as Leiba Lazarevich Feldbin in Bobruysk, Belarus. He later took the name Leon Feldbin. He came from a line of Ashkenazy Jews, who had migrated from Austria. He studied law briefly before World War I, before being drafted into the Czar’s army. In 1918, Feldbin went over to the Red Army and directed guerilla operations during the Russo-Polish war, which won him the attention of Feliks Dzerzhinsky, the founder of the
Cheka
, the first Soviet secret police. After the conflict, Feldbin went to work for that organization, and by 1920 his name was Lev Nikolayevsky or Lev Nikolsky. His obvious gift for foreign languages landed him in overseas operations for the secret service. He went to Paris as an undercover agent posing as trade delegate Léon Nikolayev. In January 1928, he was transferred to Berlin with the same title and the name Lev Lazarevice Feldel. In April 1931, Moscow called him back home to head the agency’s economic department.
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After only a short stay, he went to Berlin, where he got to know a General Motors employee and used that contact in September 1932 to make a trip to the U.S., which still did not have diplomatic relations with the Soviet Union. General Motors thought he was interested in buying a fleet of cars for Moscow, but he was actually trying to obtain a U.S. passport in the name of William Goldin. While in New York City, he also checked out dead-drop sites that might someday be useful for smuggling or making clandestine deals. He returned to the Soviet Union on November 30.

In July 1934, the star spy was off to London. Using the “William Goldin” passport and professing to be a European-born American working for a U.S. refrigerator company, he recruited university students with leanings toward Marxism. His plan was to nurture them until they reached high government positions. In February 1935, William Goldin took over responsibility for Kim Philby (code-named
Söhnchen
) and taught him the basic tricks of the trade. Philby went on to become a top Soviet spy. By early 1935, Goldin was back in Moscow.

In the spring of 1936, the peripatetic spy was one of the six men giving intelligence briefings to the Soviet Politburo and foreign ministry. In that position, he had frequent contacts with Stalin. On August 26, Security Boss Genrikh Yagoda told Lev Nikolsky, as he was still known in Moscow, to go to Spain and organize a counter-intelligence service that would make guerrilla attacks. Before departing, he met with Foreign Secretary Maxim Litvinov, who told him that he would need a new undercover name. Litvinov threw out several suggestions, including Alexander Orlov, the name of an obscure Russian writer. On September 5, Litvinov signed the passports of the new Alexander Orlov, his wife Maria, and daughter Veronika, who would be accompanying him to Spain. He arrived in Madrid on September 16.
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A photo of Orlov taken in Spain shows someone who looks more like a bank senior vice president than a spy. He was about 5 ft. 7 in. and wore a dark suit and white shirt, with just a touch of cuff showing. His dark hair was slightly receding and parted on the left. A white handkerchief peaked out of his vest pocket. With his feet well planted, he was the image of someone accustomed to being in charge. His most striking feature was a neatly trimmed mustache. Hollywood in the 1930s would have cast Adolphe Menjou to play Orlov.

A Republican cabinet shuffle on September 4, ushered in several new cabinet ministers as the government shifted sharply to the left. Socialist Francisco Largo Caballero, 67, a labor leader who had once worked as a plasterer, became prime minister, and for the first time communists were in the cabinet. With the military situation deteriorating and the Italians and Germans continuing to ship materiel and men to the Nationalists despite the non-intervention agreement, the Republicans were desperate to get more weapons. France and Britain clearly were not going to help them, and in fact might block their efforts to sell gold for armaments. The Spanish Republic’s only option was the Soviet Union. The Politburo discussed a deal called Operation X on October 17 and gave it the go-ahead two days later. It involved the delivery of fifty T-26 tanks plus fuel and ammunition and also bombers and small arms. The Soviet aid to the Spanish government eventually more than balanced out the amount of munitions the Germans and Italians gave to Franco.
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The driving force of the new government was Juan Negrín, the 43-year-old finance minister. He was a medical doctor and polyglot who had studied in Germany and spoke English, French, and German. Negrín and Arthur Stashevsky, who had arrived in mid-October to be the Soviet trade envoy in the new Madrid embassy, were soon fast friends. Stashevsky had once served in the Red Army, but left following the Bolshevik victory to reorganize the country’s fur industry, a key sector that supplied the state with badly needed foreign currency. He married a French woman and enjoyed the good life.
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Negrín and Stashevsky shared long lunches, where they discussed Spain’s need for weapons. In a locked drawer of his desk, the finance minister kept a card with a list of all the financial resources the government had available to fight the war, broken down into gold, silver, and pesetas. He told American journalist Louis Fischer in September 1936 that the Republic had “approximately 600 million gold dollars.”
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Some of it was in the form of coins, often dating back to the Spanish conquistadores, which probably had greater numismatic value than the gold price.

While the Soviets quickly established a strong presence in Madrid, the Republican government was much slower off the ground diplomatically. On September 21, Prime Minister Largo Caballero named Marcelino Pascua ambassador to Moscow, but he didn’t arrive in the Soviet capital until October 7. Pascua was a medical doctor by training and had no previous diplomatic experience. His main qualification for the job was that he had once traveled to the Soviet Union to study its health system. Shortly before the ambassador left for Moscow, he met with Largo Caballero and asked for specific instructions. The Prime Minister replied, “Well now, you know the political and military situation. You’ve got to convince them to help us immediately with military equipment—above all with aviation.”
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Franco’s armies were now only twenty miles from the capital, and the government had received reports that Catalan anarchists, radical supporters of the government, were planning to grab the gold in Madrid and take it to Barcelona. Only nine days after taking office, Largo Caballero and Negrín got President Azaña to sign a secret decree that authorized the finance minister to move some 10,000 cases of gold and silver from Madrid to a “place which in his opinion offers the best security.”
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On September 13, Prime Minister Largo Caballero authorized Negrín to ship the bullion from the Madrid vaults to a naval installation overlooking the port of Cartagena on the country’s Mediterranean southeastern coast. At 11:30 P.M. on September 15, the first convoy of 800 cases of gold coins in bags left the Madrid central bank for the city’s Atocha railroad station. The next day it was loaded onto train wagons and arrived at its final destination at 2:30 A.M. on September 17. Eventually all 10,000 cases of gold and silver in Madrid were sent there. About one-fifth of the shipment was immediately sent to Marseilles to be turned into hard currency for the government.
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The remaining cases, which contained 510 tons of gold, would be sent to Moscow. Only Negrín, Azaña, Largo Caballero, and Francisco Méndez Aspe, the director general of the Treasury, knew that it had been moved.

The location was as far away from Franco’s armies as possible while still being in Spain. The gold was stored in a naval ammunition dump inside a large cave hewn out of rock. At the front were two heavy wooden doors. Guards were told that the boxes contained munitions. The national treasure was now better protected in Cartagena, but the government still needed weapons to fight Franco’s well-armed rebels.

No one knows for certain whether it was a Spaniard or a Soviet who first proposed sending the Spanish gold to Moscow. The reality was that with the arms embargo put in place by leading European nations, Spain had no other choice for getting military hardware. Walter Krivitsky, a Soviet spy working at the time in The Hague but also involved in Spanish affairs, later wrote, “Stashevsky offered to take the Spanish gold to Soviet Russia, and to supply Madrid with arms and munitions in exchange. Through Negrín, he made the deal with Largo Caballero’s government.” According to Krivitsky, Soviet agents began calling Stashevsky the “richest man in the world” because he controlled the Spanish gold.
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Alexander Orlov maintained in his autobiography that Finance Minister Negrín first sounded out Soviet Trade Attaché Winzer “about storing the gold in Soviet Russia.”
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On October 15, Largo Caballero sent a letter to Stalin asking if he would “agree to the deposit of approximately 500 tons of gold, the exact weight to be determined at the time of delivery.”
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Stalin sent back his acceptance two days later.

Orlov was in his Soviet embassy office on October 20, when the code clerk brought him an encrypted telegram. The aide had read only the first line: “Decode immediately. Absolutely secret. This telegram must be decoded by Schwed personally.”
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Schwed was Orlov’s code name. The cable read: “Arrange with the head of the Spanish Government Caballero for shipment of the gold reserves in Spain to the Soviet Union. Use a Soviet steamer. Maintain utmost secrecy. If the Spaniards demand from you a receipt, refuse. I repeat refuse to sign anything. Say that the State Bank will issue a formal receipt in Moscow. I hold you personally responsible for this operation.” The name at the end of the message was Ivan Vasilevich, the moniker Stalin used for his most secret communications. It is also the Russian name for the person known in the west as Ivan the Terrible, the brutal medieval czar whom the Soviet leader greatly admired.

Ambassador Rosenberg was officially in charge of the whole operation, but Orlov handled the details. Both were flabbergasted that the Spaniards would entrust their gold to Stalin. Orlov later wrote of Negrín: “The finance minister seemed the very prototype of the intellectual—opposed to communism in theory, yet vaguely sympathetic to the ‘great experiment’ in Russia. This political naïveté helps to explain his impulse to export the gold to that country.”
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Two days later, the two Soviet officials met Negrín to go over transportation details. That was Orlov’s job, so he and Negrín conducted business in a mixture of English, French, and German. The finance minister repeated that his government wanted to send its gold to the Soviet Union to buy weapons, adding that the shipment involved about 700 tons. The actual figure turned out to be closer to 500 tons. The Soviet Secret Service already knew independently that it had been shipped to Cartagena, but Orlov asked him where it was just to test him. Negrín replied that it was there and was safely “in one of the old caves north of the town used by the navy to store munitions.”
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That location made things easier for Orlov because the Soviets were already unloading arms and munitions there.
Campeche
, a Spanish tanker and the first ship bringing Soviet arms to Spain, arrived in Cartagena from the Crimea on October 4. A Soviet tank brigade had also docked a few days later and was still housed nearby. Negrín offered to get a team of Spanish soldiers to transfer the gold to the boats, but Orlov begged off, saying that was too risky. He wanted to use his own soldiers.

Orlov asked the finance minister to provide him with false documents that would show he was a British or American official. If the Spanish police stopped him, he could claim that the Republican government had decided to send the gold to that country for safekeeping. The two men quickly agreed that Orlov would be a representative of the Bank of America, not realizing that it was a private financial institution that had its headquarters in California and not the U.S. Central Bank. He should have been representing the Federal Reserve Bank. Negrín proposed that Orlov take the name Blackstone for the operation, and had his office draw up an official-looking document bearing Negrín’s signature that asked Spanish authorities to give whatever assistance was needed to “Mr. Blackstone, plenipotentiary representative of the Bank of America.”
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The following day, Orlov had just left for Cartagena on a Spanish air force plane when two German bombers and several fighters spotted his aircraft. One of them strafed his plane, which had to make an emergency landing. The next day he continued by car to Cartagena, where he met with Soviet Naval Attaché Nikolai Kuznetzov. Orlov explained that he was arranging shipment of “a highly strategic material” and asked to send it home on any arriving Soviet vessel.
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The Soviet ship
Volgoles
was already in port and was the first to be loaded. Orlov decided it was safer to split the precious cargo among several ships, eventually using four.